Thursday, February 14, 2008

Spain Preliminary GDP Q4 2007

Well, blow me down! Spanish GDP growth apparently accelerated in the last quarter of last year, with the quarter on quarter rate increasing very slightly from 0.8% in Q3 (over Q2) to 0.9% in Q4 over Q3 according to data released by the Instituto Nacional de Estadistica earlier today. The year on year growth rate was still 3.5%. This means something somewhere is resisting the slowdown. Since most of the indicators have been pointing to red during the quarter, and since we have elections coming in March one good guess is an increase in public spending (and I'm not suggesting there is anything improper in that, since this is how fiscal policy should be used, countercyclically). Another possibility, since Spain runs a systematic trade deficit, is that imports slowed on the back of slowing domestic demand, and in this way the trade deficit reduced somewhat, thus constituting less of a drag on GDP. Also construction is still working reasonably steadily at this point - which is why all those unsold houses are accumulating - since builders are still completing houses which were contracted before the August credit crunch, and it is important to notice that Spain is working to some extent back-to-front with the US promlem, since the difficulties really appeared in the financial sector first, and they are only now spreading to the real economy, starting with construction. But all of this at this stage is simply idle guessing, and we won't really know anything for sure till we get the detailed data from the INE on 20th February.

According to the quarterly GDP advance estimate, during the fourth quarter of 2007, the Gross Domestic Product (GDP) generated by the Spanish economy registered a real growth rate of 3.5%, as compared to the same period of the previous year. In this way, the Spanish economy slowed its rate of progress by three points, as a result of a slow-down in national demand, which was partially compensated by the less negative contribution of the foreign sector. Moreover, the quarter-on-quarter GDP growth rate stood at 0.8%, one tenth more than in the previous quarter. By temporary aggregation of the four quarters, real growth of GDP for the entirç year 2007 was estimated at 3.8%, one tenth less than in 2006.

But as I say, all the dials ARE steadily moving over to red in Spain now, and as if to make the point Eurostat yesterday published the December industrial output figures, which show that there is now a significant and steady slowdown taking place.

And indeed, on a month on month basis we had contraction in industrial output in both November and December. Add to this the fact that retail sales also contracted in both the same months and it isn't hard to see that there isn't a exactly a lot of life in the Spanish economy at this point, despite the apparent "acceleration".